Retail Sales Up Sharply In February - March 13, 2013

An hour before the commencement of trading today, the Commerce Department released its latest report on retail sales for the month of February. That report, which was expected to be closely watched as a gauge to how the all-important consumer sector is faring, was inspiring. Specifically, the Commerce Department reported that retail sales rose 1.1% last month, to $421.4 billion. Total sales for the December 2012 through February 2013 period were up 4.5% from the same period a year ago.

The 1.1% month-to-month advance was above the consensus expectation of 0.6% increase. The positive showing (up 4.6% year over year) was yet another indication that the U.S. economy is continuing to strengthen, even if the growth is not as formidable as it should be at this stage of the economic up cycle. This report, along with favorable data recently on jobs creation, manufacturing and nonmanufacturing activity, housing, and consumer confidence are more signs that the U.S. economy will grow at a much more formidable pace than the 0.1% advance in the final quarter of 2012. More importantly, the latest data are an indication that the recently enacted payroll tax hikes are not having, at least initially, as big an impact on consumer spending as many pundits feared. Americans kept spending last month despite the higher Social Security taxes that took effect at the start of this year.

Meantime, a closer look also unveiled some positive aspects in addition to the excellent headline number of 1.1% growth. Core retail sales, which exclude gas, autos and building supply store sales, rose 0.4% sequentially in February. Auto sales rose 1.1% after a 0.4% January gain. The February increase was the biggest since December. And even when excluding gas purchases, which accounted for nearly half of the total, retail sales rose a solid 0.6%. This is important, as the consumer accounts for slightly more than two-thirds of the nation’s economic output.

All in all, the latest retail sales data was another positive report on the state of the U.S. economy. Looking forward, the continued well being of the U.S. consumer will be vital for the domestic economy, as the ongoing financial and economic problems in the euro zone and recent lackluster economic data from China and Japan may result in lower overseas demand for American goods in the coming months.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.